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We construct carbon footprints from households' expenditure and employ the EASI demand system to simulate the distributional and environmental effects of a introducing a 'green VAT' in Ireland. For our analysis, we combine expenditure data from the Irish Household Budget Survey with data on consumption-based emissions. We consider three scenarios: one with no recycling mechanism for additional tax revenue, one with a five per cent higher state transfers and one with an income tax cut. In all scenarios, the existing VAT system is replaced by a combination of a uniform base rate of four per cent and a strong carbon tax component. The policy leads to a reduction in emissions from households of roughly 6 per cent. We find that households' footprints are strongly driven by expenditure on energy and transport. Average emissions footprints are higher for high-expenditure quartiles. We also find that while the tax leads to welfare drops for all households, especially those at the lower end of the distribution of household expenditure, the combined carbon tax and transfer increase are protecting at least the lowest two deciles of the expenditure distribution from the adverse welfare effects. The income tax cut limits the reduction in working hours present in the other two scenarios. Both revenue recycle mechanisms weaken the reduction in emissions.

The aviation sector has a significant role to play in the reduction of carbon emissions, particularly in light of EU emissions targets. Within the EU, aviation emissions constitute 13.9 per cent of total transport emissions, where under the Green Deal a target of 90 per cent reduction in transport emissions by 2050 has been set. Several tax exemptions apply to the aviation sector due to its international nature, which have contributed to an increasing trend in emissions. Recent movements in EU policy under the 'Fit for 55' package, as well as public and political interest, have focused attention on changing the taxation struc-ture of the aviation industry in order to reduce CO2 emissions. This report focuses on several different potential policies and taxation structures which would attempt to decrease the emissions of the aviation sector: the removal of kerosene taxation exemption (in line with the recent EU proposal), removal of VAT exemption, introduction of a passenger tax, and abolition of free EU ETS allowances by 2026 (in line with the recent EU proposal). Each of these policies, as well a combination scenario, is assessed with respect to the impacts on the aviation industry, spillover effects, macro-economic and government revenue effects, and household effects, as well as the emissions impacts. This analysis applies the Ireland, Environment, Energy and Economy (I3E) model, which allows for the examination of spillover effects of the aviation industry to government, households and other industries. This methodology does not, however, allow for a detailed analysis of different passenger or airline types. In what follows, results are shown as cumulative percentage changes compared to no aviation taxation. Hence a decrease does not present an annual decrease but the build up of a cumulative decrease from 2022 to the given year.

We present a modification of the most commonly used integrated assessment model (IAM) of climate change (DICE-2016), AD-DICE2016, which is designed to address three key aspects of climateeconomy models: treatment of uncertainty, the use of more appropriate utility functions, and including adaptation policies to climate change. These modifications ensure that two of the key difficulties identified with IAMs, the choice of the risk aversion parameter and the underestimation of damages, are also directly addressed. The use of a bounded (Burr) utility function ensures that the model is able to appropriately assess the effects of parameters whose distributions have "fat tails". Uncertainty is accommodated via the state-contingent approach enabling us to include more state (seven) and control variables (four) than recursive derivatives of DICE. Our approach to uncertainty ensures that the optimal climate policies account for outcomes in every possible state, unlike the Monte Carlo approach. Our treatment of uncertainty is extensive: eight parameters are allowed to be random, with distributions - many "fat tailed"- identified using current knowledge. Our model suggests that uncertainty regarding damages and climate sensitivity are key drivers of climate policy. We also find that uncertainty leads to increases in both optimal mitigation and adaptation, with adaptation and mitigation reacting differently to uncertainty over different parameters. Finally, our estimates of the social cost of carbon are larger when uncertainty is allowed for and significantly affected by adaptation.

This paper examines the economic and environmental impacts of the adoption path of electric vehicles (EVs) and home retrofitting in the form of heat pumps (HPs) projected in the recent Climate Action Plan (CAP21) for Ireland. This analysis assumes the level of carbon tax follows the path committed by the Irish government in June 2020 and in the CAP21; reaching C100 per tonne of CO2 in 2030 and includes a government subsidy for HPs. The results show that an increase in the carbon tax has substantial impacts on emission reduction, and EV adoption and HP installations can further reduce emissions but to a lesser degree than the carbon tax increase. Compared to a carbon tax alone, the wide-scale adoption of EVs and HPs boost the economy and employment. This boost leads to a rebound effect, where emissions increase slightly in other sectors of the economy. The results prove the importance of simultaneous use of carbon taxation and electrification of transport and home heating, where carbon taxation increases the benefits of adopting low carbon technologies and adoption reduces the costs of carbon taxation.

Reducing energy consumption and emissions from freight transport plays an important role in climate change mitigation. However, there remains a need for enhanced policymaking and research to explore a low carbon future of freight transport. This research establishes a freight transport model to simulate transport demand (tonne kilometre), energy consumption and emissions. The model incorporates macroeconomic factors, policy indicators, technological characteristics, detailed profiles of the vehicle stock and travel distances, and behavioural parameters with discrete based choices. This model is applied to the freight transport sector in Ireland with scenarios running out to 2050. The results show that overall freight transport demand increases substantially from 2015 to 2050. Economy-wide climate policies (i.e. carbon tax) and high fuel prices result in modest reductions in energy consumption and CO2 emissions in freight transport, compared to a baseline. Sectoral measures, such as European CO2 emission performance standards, that aim to improve new vehicle fuel efficiency/emission rates can potentially lead to significant reductions, but such measures face a lag in greening the goods vehicle stock in the short/mid term, and uncertainties in policy compliance and technical barriers in the long run. Notably, in spite of few commercially mature vehicle technologies, adoption of biofuel and alternative freight vehicles are expected to bring additional reductions in future energy consumption and emissions. In all, for a transition to a low carbon future for freight transport, a comprehensive and dynamic policy agenda should be developed to promote low or zero emission vehicles, especially for heavy goods vehicles.

Climate change is considered the biggest environmental challenge facing the world. The expected concomitant economic impacts of climate change are substantial, where the African continent is expected to be particularly vulnerable. Research is needed to support the development of sound climate policies in Africa. This paper develops a new Integrated Assessment Model -AD-AFRICA- which allows a comprehensive analysis of climate change impacts and adaptation in Africa. The AD-AFRICA model divides Africa into five regions and includes seven specific climate change impacts. The effects of the Paris agreement Intended Nationally Determined Contributions (INDCs) and the below 2 degrees target are investigated. The results show that though the INDCs reduce impacts, reaching the goal of the agreement will further reduce impacts by almost 1.6 % of GDP (588,731 US$ Billion). This highlights the importance of re-examining the level of INDCs. Furthermore, our results show that health and tourism impacts are highest and that different regions in Africa are more vulnerable to different climate change impacts depending on their level of development and regional characteristics. Finally, the withdrawal of the US from the Paris Agreement would result in an additional climate change burden of around 87 US$ Billions to Africa.

The I3E (Ireland Environment, Energy and Economy) model is a single-country, intertemporal computable general equilibrium (CGE) model focusing on environmental policies in Ireland. However, the depth of its modelling, which incorporates the economic interactions between production sectors and other agents, also facilitates its use in wider macroeconomic policy analysis. In the Economic and Social Research Institute (ESRI), there are several macroeconomic models developed and applied to investigate macroeconomic policy issues. These are HERMES (Harmonised Econometric Research for Modelling Economic Systems), COSMO (COre Structural MOdel), and FIR-GEM (Fiscal Irish General Equilibrium Model). As with all economic models, the four models vary in their underlying mechanisms and methodologies, and each model has its associated advantages and disadvantages. The focus of this paper is to show the consistency of the I3E model when compared with these existing models. To do so, we compare the results of four different scenarios, and we find that the results of these shocks when applied to the I3E model are largely in line with the respective results of the other three models. Furthermore, any differences can be explained by the different modelling techniques and/or assumptions. As such, we consider the I3E model to be a reliable tool to be used for both environmental policy analysis, and wider macroeconomic policy analysis on the whole.

This paper investigates the economic and environmental impacts of an incremental increase in the rate of Irish carbon tax. For this analysis an intertemporal computable general equilibrium (CGE) model, namely Ireland Environment-Energy-Economy (I3E), is developed. This model allows for the investigation of industry level impacts as well as economy wide impacts by explicitly modelling sectoral interlinkages. We examine two potential future paths of carbon tax increases and the impacts of recycling carbon tax revenues through a lump sum transfer to households. Our results show that LPG, diesel and gasoline prices will be impacted most with increases of up to 10% in 2020 compared to a baseline scenario. The energy and transport sectors will be hit the hardest with losses of up to 4% of value added in 2020. Households face higher overall prices, with an up to 2.4% increase in the CPI in 2020 which lowers household real disposable income by 0.24% in 2020. Though income increases as prices rise, households consume less and save more in the medium-run. Driven by this decline in real private consumption, real gross domestic product declines, though at a negligible rate of 0.4% in 2020. Overall emissions in 2020 fall by 18% compared to the baseline. However, this is still far short of EU targets.

The thirteenth Conference of the Parties to the United Nations Framework Convention on Climate Change in 2007 decided that developing countries should be compensated for adaptation costs to climate change through the Adaptation Fund (first draft decision of the third session of the conference of the parties serving as the meeting of the parties to the Kyoto Protocol). This shows that adaptation to climate change has become important in international climate negotiations. Today, adaptation is widely recognized as an equally important and complementary response to climate change mitigation (for example, Commission of the European Communities 2007; IPCC 2007a; Agrawala and Fankhauser 2008). Still, relatively little information is available to support more integrated climate policies that focus on both mitigation and adaptation (Klein et al. 2005). In particular, in integrated assessment models that aim at supporting climate policy by analysing their economic and environmental consequences and formulating efficient responses, explicit consideration of adaptation is still in its infancy (Tol 2005; Wilbanks 2005; Agrawala et al. 2008). This chapter tries to fill the gap in integrated assessment models by integrating adaptation and residual damage functions from AD-RICE (de Bruin et al. 2009) with the FAIR model (den Elzen and van Vuuren 2007; Hof et al. 2008). This version of the FAIR model (from now on called AD-FAIR) enables an analysis of the interactions between mitigation, emissions trading, adaptation and residual damages (that is, damages not avoided by adaptation measures) on a global as well as regional scale. Furthermore, adaptation is modelled explicitly as a policy variable, providing insights in the economic consequences of adaptation. This information is vital for effective adaptation governance.

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This paper investigates the economic incentives of countries to cooperate on international adaptation financing. Adaptation is generally implicitly incorporated in the climate change damage functions as used in Integrated Assessment Models. We replace the implicit decision on adaptation with explicit adaptation in a multi-regional setting by using an adjusted RICE model. We show that making adaptation explicit will not affect the optimal mitigation path when adaptation is set at its optimal level. Sub-optimal adaptation will, however, change the optimal mitigation path. Furthermore this paper studies for different forms of cooperation what effects international adaptation transfers will have on (i) domestic adaptation and (ii) the optimal mitigation path. Adaptation transfers will fully crowd out domestic adaptation in a first best setting. Transfers will decrease overall mitigation in our numerical simulations. An analytical framework is used to analyse the most important mechanisms and a numerical model is used to assess the magnitude of effects.

The dominant assumption in economic models of climate policy remains that adaptation will be implemented in an optimal manner. There are, however, several reasons why optimal levels of adaptation may not be attainable. This paper investigates the effects of suboptimal levels of adaptation, i.e. adaptation restrictions, on the composition and level of climate change costs and on welfare. Several adaptation restrictions are identified and then simulated in a revised DICE model, extended with adaptation (AD-DICE). We find that especially substantial over-investment in adaptation can be very harmful due to sharply increasing marginal adaptation costs. Furthermore the potential of mitigation to offset suboptimal adaptation is investigated. When adaptation is not possible at extreme levels of climate change, it is cost-effective to use more stringent mitigation policies in order to keep climate change limited, thereby making adaptation possible. Furthermore not adjusting the optimal level of mitigation to these adaptation restrictions may double the costs of adaptation restrictions, and thus in general it is very harmful to ignore existing restrictions on adaptation when devising (efficient) climate policies.

This paper investigates the economic incentives of countries to cooperate on international adaptation financing. Adaptation is generally implicitly incorporated in the climate change damage functions as used in Integrated Assessment Models. We replace the implicit decision on adaptation with explicit adaptation in a multi-regional setting by using an adjusted RICE model. We show that making adaptation explicit will not affect the optimal mitigation path when adaptation is set at its optimal level. Sub-optimal adaptation will, however, change the optimal mitigation path. Furthermore this paper studies for different forms of cooperation what effects international adaptation transfers will have on (i) domestic adaptation and (ii) the optimal mitigation path. Adaptation transfers will fully crowd out domestic adaptation in a first best setting. Transfers will decrease overall mitigation in our numerical simulations. An analytical framework is used to analyse the most important mechanisms and a numerical model is used to assess the magnitude of effects.

Integrated Assessment Models (IAMS) have helped us over the past decade to understand the interactions between the environment and the economy in the context of climate change. Although it has also long been recognized that adaptation is a powerful and necessary tool to combat the adverse effects of climate change, most IAMs have not explicitly included the option of adaptation in combating climate change. This paper adds to the IAM and climate change literature by explicitly including adaptation in an IAM, thereby making the trade-offs between adaptation and mitigation visible. Specifically, a theoretical framework is created and used to implement adaptation as a decision variable into the DICE model. We use our new AD-DICE model to derive the adaptation cost functions implicit in the DICE model. In our set-up, adaptation and mitigation decisions are separable and AD-DICE can mimic DICE when adaptation is optimal. We find that our specification of the adaptation costs is robust with respect to the mitigation policy scenarios. Our numerical results show that adaptation is a powerful option to combat climate change, as it reduces most of the potential costs of climate change in earlier periods, while mitigation does so in later periods.